It was clear the YouTube Music Awards were in trouble when Rashida Jones handed a pair of babies to hosts Jason Schwartzman and Reggie Watts for no apparent reason. The live event, broadcast Sunday from New York City, was a mix of live videos from some of the biggest artists in music, time-killing ramblings from the hosts and a scavenger hunt in which the hosts dug through a series of cakes looking for one of the awards. It was the exact opposite of MTV’s glossy and popular Video Music Awards.

Perhaps that was the point. YouTube rose to prominence thanks to low-production-value clips of toddlers biting each other’s fingers and teenagers dancing in their bedrooms. This year the video site’s biggest viral craze involved thousands of people dancing in their homes and offices to an obscure song called the “Harlem Shake.” But the low-budget feel of the show — hosts Schwartzman and Watts bantered with each other as production staff and musical guests occasionally wandered in front of the camera — was in some ways at odds with YouTube’s increasingly important role on the professional side of the music business. “It’s a glamorous business,” says Catherine Moore, associate professor of music business at New York University’s Steinhardt School of Culture, Education and Human Development. “Awards shows are a way to bolster the glamour and benefit from being connected to the glamour.”

The YouTube awards come off more like fan service, seemingly by design. Arcade Fire opened the show with an elaborate performance for their new song “Afterlife” that culminated in actress Greta Gerwig dancing with a troop of preteen ballerinas. But viewership dropped when Lady Gaga sang the somber ballad “Dope” from her new album, ARTPOP, choosing a plain flannel shirt and a trucker hat over her typical outlandish outfits. Even more people tuned out when a performance by rappers Tyler the Creator and Earl Sweatshirt became a censored mess (though only broadcast online, the show mostly adhered to FCC standards). Eminem, M.I.A. and YouTube star Lindsey Stirling performed later, but none managed to attract more viewers.

YouTube has successfully live-streamed high-profile concerts in the past. American Express sponsors an ongoing series that has featured artists such as Coldplay, John Legend and the Killers. The music festival Coachella is now annually live-streamed via YouTube and this year racked up more than 1.9 million unique viewers. But Sunday’s awards show, which was promoted by YouTube for weeks, reached fewer than 250,000 simultaneous viewers. MTV’s VMAs had 10.1 million viewers in August, though YouTube now claims to reach more 18-to-34-year-olds in the U.S. than any cable network.

The offbeat show comes at a time when YouTube’s clout in the music industry is quickly increasing. A new Glee-style musical drama called Side Effects, complete with glossy covers of pop hits, debuted on the video site last week. Billboard added YouTube views to the formula used to calculate its weekly Hot 100 rankings earlier this year. And the company is prepping a paid-subscription service for early 2014 that could go toe-to-toe with Spotify, according to a person familiar with the company’s plans.

These are logical extensions of influence for a website that has been a go-to destination for music since it emerged almost a decade ago. “When YouTube launched, it was such a new thing and people probably looked at it [as] very promotional, very much like they looked at the MTVs or the VH1s or the CMTs of the past,” says David Bakula, senior vice president at Nielsen Entertainment. “Now within the younger age groups, teens and young adults, YouTube is the No. 1 source of music consumption for them.”

The new subscription service, which is expected to have paid and free tiers, will help to wring more money out of YouTube’s 1 billion users, who are now watching about 30 billion music videos each month. Subscribers will be able to more easily organize YouTube’s current mishmash of official videos, parodies and covers by organizing content by artists or playlists. The service will also make YouTube easier to listen to on the go, as users will be able to download videos to watch offline and listen to songs while performing other tasks on a phone or tablet. It’s also expected to link up in some way with Google’s current music-streaming offering, Google Play Music All Access, which could give the service a catalog of content that dwarfs all other competitors.

Still, it’s not clear how readily people will pay for music from a brand that has always been free. YouTube has already been experimenting with paid channels in other sectors, like sports and children’s programming, but it hasn’t divulged any subscription figures. Early reports indicated that user interest is muted. “They have to be realistic and know that the vast majority of people — and possibly especially on YouTube — are going to just use the free service,” Moore says.

Meanwhile the competition to control the distribution of music online only grows fiercer. Apple’s iTunes Radio got off to a quick start in September, while headphone maker Beats Electronics is expected to debut a Spotify-like streaming service by year’s end. And Vevo, the label-backed music-video website that supplies much of YouTube’s most popular content, is increasingly trying to establish an independent identity with its own set of apps and a newly revamped website.

Sunday’s awards program illustrated the challenges YouTube will face as it expands beyond its core mission of hosting user-generated videos for a mass audience. But the company is already a powerful giant in the music world, and it could help record labels tap a new revenue source. “Getting streaming music to kind of turn the corner and getting more people to subscribe to these services is hugely important to the short- and long-term health of the music industry,” says Bill Werde, editorial director of Billboard. “To that end, they’re excited to see a massive and established player like YouTube get into the game.”